Does Ritchie Bros. Auctioneers (NYSE:RBA) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Ritchie Bros. Auctioneers (NYSE:RBA), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Our analysis indicates that RBA is potentially undervalued!

How Quickly Is Ritchie Bros. Auctioneers Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Ritchie Bros. Auctioneers has grown EPS by 30% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Ritchie Bros. Auctioneers remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.6% to US$1.6b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Ritchie Bros. Auctioneers' forecast profits?

Are Ritchie Bros. Auctioneers Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While we did see insider selling of Ritchie Bros. Auctioneers stock in the last year, one single insider spent plenty more buying. To be exact, CEO & Director Ann Fandozzi put their money where their mouth is, paying US$999k at an average of price of US$52.25 per share That certainly piques our interest.

Should You Add Ritchie Bros. Auctioneers To Your Watchlist?

You can't deny that Ritchie Bros. Auctioneers has grown its earnings per share at a very impressive rate. That's attractive. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. In essence, your time will not be wasted checking out Ritchie Bros. Auctioneers in more detail. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Ritchie Bros. Auctioneers that you should be aware of.

The good news is that Ritchie Bros. Auctioneers is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.